State Farm faults Toyota for gas pedal claims; Subrogation begins

According to a report in USA Today, State Farm wrote to Toyota in 2007 asking the automaker to pay for an insurance claim for a 2005 Camry that had reportedly been wrecked as a result of accidental acceleration, saying, "we are aware of several complaints to your company of sudden acceleration involving the Toyota Camry." The National Highway Traffic Safety Administration (NHTSA) was copied on the note, and the government agency wrote back to State Farm stating that it had been looking into unintended acceleration claims since August of 2006, but the investigation had been closed. See Autobody News March for the story.

State Farm stated in the letter that the 2005 Toyota Camry's owner had reported sudden acceleration issues to her mechanic twice before the accident occurred. The NHTSA told State Farm in its reply that it was investigating similar complaints, dating back to August 2006.

Now State Farm wants Toyota to reimburse it for its payments to auto insurance policyholders who suffered damages from crashes caused by unintended acceleration of the automaker’s vehicles. The insurer confirmed that they have begun the subrogation process with claims for Toyota vehicles subject to the automaker’s recall of nearly 8 million vehicles for gas pedal flaws. (Subrogation is the process in which an insurance company sees reimbursement from the person or entity legally responsible for an accident after money has already been paid to the insured.)

Other companies are likely to follow State Farm in making the requests. USA Today reported that Mark Bunim, a lawyer with Closed Case, a mediation company, estimated Toyota’s total payouts on insurance claims could reach $30 million.

If Toyota doesn’t pay the claim of State Farm and any other auto insurers who make the request, the insurers are likely to increase the rates for insuring Toyotas, State Farm told officials told the newspaper.

Toyota was was recently fined $16.4 million for violating a requirement to report problems with the gas pedals to federal officials within five days, and a secondary fine may be in the works. Allstate's Mike Siemienas told National Underwriter that the insurer told Toyota that “we have claims that we believe are the result of a product defect.”

State Farm, which said in February it was considering subrogation action, declined to comment further to National Underwriter.

Progressive told the insurance publication that it’s “continuing to review claims and subrogate as necessary,” while Toyota declined to comment.

The automaker’s total payouts on insurance claims could reach $30 million, Mark Bunim, a lawyer with mediation company Closed Case, told USAToday.

State Farm might recoup up to $30 million from Toyota saying customers involved in unintended acceleration crashes in a Toyota could get their deductible cash back, usually between $250 to $1,000. Case Closure mediation attorney Mark Bunim reportedly told said that the process could take some time to resolve as someone would need to check every Toyota claim and determine whether the accident involved sudden acceleration.

If Toyota doesn't pay for the insurance claims, the automaker could indirectly foot the bill with higher insurance premiums. Due to Toyota's otherwise strong quality and safety reputation, its vehicles are currently relatively inexpensive to insure. If Toyota pays State Farm for accidents involving unintended acceleration it's a near guarantee that other insurers will follow suit.